Turnover
The road from initial idea for a product/service to collecting cash in exchange for it is a long one.
It involves a sequence of three processes:
• Idea to Market
• Prospect to Order
• Order to Cash
An accountant's view of turnover is strict: it is recorded once the invoice is sent. For other functions, the perspective varies. The developer sees future turnover. The demand planner sees forecast turnover. The sales manager sees orders taken in while the treasurer sees cash collected.
In addition there are various types of turnover - gross, net, external, inter-company and intra- company to name just a few.
Whatever the form, turnover is an indication of a company's performance, but there are serious pitfalls in looking only at turnover. It is the relationship of turnover to costs that is the decisive factor in understanding the contribution of turnover to the company's bottom-line performance.
Companies whose initiatives include a drive for 'top-line-growth' may do this for good reasons such as increasing market share, improving return on assets or overall profit growth. Some companies decide to go for 'value based sales order processing', allowing their cost allocations to drive the order acceptance policy. Payment terms have a crucial impact on working capital, hence on financing needs.
Allocating costs in relation to turnover is not just an accountant's job. It is primarily a business management process and decision. The company's performance is finally determined by the net cash contribution.
Decisions on whether turnover is monitored taking revenue and financing costs into account and at what level it is measured - (group of) customer(s) versus (group of) product combination or region(s) - are determined by management style, steering model and control performance matrix. Mechanics such as stock valuation, product costing and whether or not to allocate variances play an important role. Value sector reporting is needed to support the process. IT tools make it possible to slice and dice whatever is required.
Voorne Partners has an extensive and proven track record in assisting departments, business units and companies with turnover reporting and business analysis. We are quick to understand market and company dynamics and are able to translate or redefine the requirements into a Business Model that allows the company to monitor performance and the impact of turnover in a simple, efficient and transparent fashion.
